Funds investing in large cap growth stocks, have boosted their gold-related investment to an average of 3 percent of their portfolios since June from 0.9 percent previously, according to Financial Research Corp.

Like other investors, the funds are worried about inflation and the U.S. debt burden. Gold has recently dropped 6 percent from its record high of $1,200 an ounce. But the fund managers are undeterred.

"This price drop is to be expected after such a rise," Abhay Deshpande, co-manager of First Eagle Global fund, told The Journal. The fund has allocated 10 percent of its holdings to the precious metal.

"We're holding on to our gold," Deshpande says.

Fund managers who never considered gold before are jumping on the bandwagon.

"I didn't own gold before, but when I heard Washington talking about a new economic stimulus, I changed my mind," Steven Leuthold, head of Leuthold Core Investment fund, told The Journal.

Some experts say the fund managers will be rewarded handsomely.

David Tice, bear market strategist at Federated Investors, predicts gold will reach $3,000 in two years. “Fear is going to be key. There will be a global currency disaster ahead,” he told CNBC.

The gold rush has gotten so hot that not only are commodity mutual funds snapping up the precious metal, but stock funds are as well.
The funds are purchasing gold itself, shares of gold exchange traded funds and stocks of gold mining companies, The Wall Street Journal...